ABR - Earnings call transcript Q4 2017 | Arbor Realty Trust, Inc.

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Operator

Good day, ladies and gentlemen, and welcome to the Q4 2017 Arbor Realty Trust Earnings Conference Call. [Operator Instructions] As a reminder, this conference may be recorded. I would like to introduce your host for today’s conference Paul Elenio, CFO.

You may begin.

Paul Elenio

Okay, thank you, Glenda, and good morning, everyone, and welcome to the quarterly earnings call for Arbor Realty Trust. the XXXX. the discuss ended and we’ll XX, December morning, results quarter for year This on call me Chief With the Executive President Kaufman, Officer. and our today is Ivan

made are update to our to Before of our cautioned as detailed liquidity, Listeners Factors I are beliefs, to that speak results about are undue statements, reflect place reports. of available and be in expectations inform These possible after in condition, these risks statements financial results actual Arbor’s materially this statements expectations to future statements assumptions obligation revise forward-looking including results from SEC our you deemed we based forward-looking earnings Ivan not on differ on no need of or that to today. uncertainties, President begin, cause Arbor only Arbor’s subject events. plans which and into I’ll objectives. or may business, taking of call and future are currently and statements information to unanticipated account these or that our performance, to information reliance operations, the today assumed of call now forward-looking could forward-looking turn CEO, statements in over these undertakes the circumstances to publicly the or Kaufman. events occurrences us.

Ivan Kaufman

for us we this today’s and on as joining everyone for plans call. excited to out thanks we success significant discuss outlook and have today have am Paul, to you, in Thank always XXXX. XXXX, I closing

we and benefit market platform, with growing a morning’s rate tremendous we increasing run significant to progress our $X.XX quarter in we Agency $X.XX corporate a in very puts to estimate presence. fourth our rates see of increase our related $X.XX Business significant the will share. period with continue share quarter that can in a an As two Initially, a of make from core our resulting This schedule had this $X.XX will This and a release, and in our has brand to you to operating for our a tremendous share ahead increase around This expanding results as out annual strong dividend at to run another XX% our over dividend quarter. experienced time reduction fifth XXXX, increase XX% continue than in years once growth result again a in reflecting is in earnings an tax this or XXXX. us our to and we allowed increase dividend us to increase press combined core earnings future. the significant fourth dividends in allow grow rate an earnings less

our our turn for accomplishments through Before outlook Paul it XXXX talk results, XXXX. about I to significant over I like to our would some financial to of always as you take

were XXXX exceeded Our highlights remarkable truly and our expectations.

in structural and equity our our all Continuing and these of raising to $X.X record able earnings, XX% our Some $X.XX XX% of XXXX balance and increase truly Business in allowing producing our we substantially significant from pipeline of in debt XX% transitional market CLOs total billion terms flexibility, servicing market Agency to increase again numbers, our our in M&A fund continue of lending arena finishing since $X.X with core the future. last three optimistic sheet XXXX, our now XX% optimistic base effectively closing we’ve XXXX. extremely our in we XX% one Achieving $XXX in that at XXXX. core million substantially dividend and XX% share years accomplishments rate resulting a non-recourse in billion, be significant to resulting our Again leader increase are a to increasing the record increase total best $X.X included from and billion, capital of XXXX. very XXXX, securitization us originations million of representing growth to shareholder a us allowing incredible portfolio portfolio $XXX increase platform, results cost billion over $XX.X a for billion. increasing creative remain all had access growing for $X.X in years to be a two to Growing capital $X.X outlook from remain to run return our $XXX the our will significantly billion reduced and to aspect and we the our inception for XXXX million to from of new growth more a a earnings improved provide from

continues represent Agency and the new Business and originated year our fourth in loans Agency XXXX. of for flourish in platform. results XXXX XXXX as are volume record in to we’ve a success had $X.X which XX% billion growing Our $X.X was in us compared and of the tremendous reflective We’ve increase to billion quarter our

We best also distinct And consecutive Fannie has best as only finished lender a the lender XXth for achieved. balance for Freddie on Mac the well. number Mae with top optimal for as spot a the Mae balance and one year, XX Fannie one of

and greatly significant of broaden grow lending on and to reach products, footprint value Additionally, our arena origination market a larger our franchise. overall continue our enhance multifamily the and strong us the in allowing we of lending our to to a increase leverage GSE platform portion

rapidly even to The XXXX. and the of strong our very accretive growth and extremely our and short exceed one that duplicate to As for substantial over dividend our of confident diversify This stability a remains outlook about a experienced continues be core positive significantly extremely to also for streams. business were XXXX. numbers I’m increase a and it’s class pipeline income we’ve greatly earnings to we duration contributed our to period continued time. has result, or origination are we able

XXXX long-dated, life. mostly income XX% predictable an reoccurance, year servicing comprised the protected servicing X portfolio our income which billion XX basis $XX.X represents and point prepayment fact a income total de-stream average is GSE over from In of of with XX% our approximately sources

this Additionally platform we of finance we premium as growth a potential Agency capital a when that significant for minimizing to volatility these other companies while provides should markets business have impact compared all the reach reasons, do specialty value very believe and of have platforms. durable not increased and mortgage also

growing our approach remaining We sheet unbelievable our sheet also a and on business to lending while balance resulting million have year on vehicles. XX% extremely balance of focus $XXX financing million disciplined continued lending an in net continuing with originated are our improve in quarter, of the growth of or in the portfolio fourth $XXX one-off our quarter. loans fourth for million non-recourse that’s We transitioning $XXX

loans has heading network increased all our rate This portfolio able our will run and balance greatly to our continue is that portfolio we originated balance of to core XX% in be a transitional into XX%. concern growth we considering earnings our of This our we deep XXXX, billion almost exceeded over grow expectations and by XXXX. For XXXX portfolio originations in for grew significant future. substantially confident grew are we $X.X through our extremely the sheet

a continue to which the business key our our our critical strategy. is success our component ability for of one financing non-recourse of enhance been has Another vehicles

arena, platform. in allowing excess XXXX, which as securitization returns third success $XXX pleased of million XX% a significantly vehicle have us non-recourse our of not and in CLO This non-recourse base generate previous very tremendous vehicles returns ninth strong and debt Overall, leader to and fund closed from a reduced years status in value off with in us with success originations. we our close securitization assets We’re $X.X and largest to market was our on continues a in that only billion three non-recourse strong going for each pricing our CLOs capital. and vehicles, asset to loyal of long CLS our with are enhancing generate extremely cultivating by had franchise. we not with results our reflect our the We December. of really This value XXXX having pleased the investors to performance a approximately securitization our tremendous solid of allowing liability transaction are and -- XXXX we of periods replenishment first five out now diverse with

about continue are about excited our stability our dividends, ability continue to brands grow market and positive earning presence, originating outlook diversity, while grow ability are extremely we with to to especially core our predictability in streams. We our our forward, to our more through creating going

potential We us value investors. undervalued which also potential opportunity, are believe we significantly provides

which have industry. our in public complete franchise us lending and financial other from services we believe operating We peers differentiates

should from tiers the As could significant be premium on believe with GSE current I take a GSE business, result, our Elenio a over platforms financial we not increase coming our in more creating public we our a only you income similar now be believe our to based will platform other a GSE top significant amount as which GSE turn to guided through of in we call our Paul ratios results. valuation. result will sources

Paul Elenio

Ivan. you thank Okay,

release XXXX. had we fourth press morning our this indicated, incredible As and an quarter

result, for of XXXX. on year $X.XX per year the fourth $XX.X and XXXX. As and for was equity both the share XX% $XX.X AFFO a million full return per the quarter or average This $X.XX annualized into of an share translates or for million approximately fourth quarter common full

dividend we again two are record very we quarter. a This dividend this mentioned, fifth than up we’ve increase over time is Ivan our years represents that pleased to time As continue and increased to increased less in and the XX% our have period. put results

run into XXXX. quarter pleased earnings extremely our growth our increased also fourth heading with rate which We’re core has

estimate business reduction in and our tax to AFFO approximately Additionally from tax by increase result XX% increase our to the a we will GSE $X.XX that share to our as our in rates our Ivan $X.XX ever from will well. which earnings mentioned in earnings ability a more of as after in earlier, corporate the future, And the XXXX predictable XX% earnings in an more creating are and from from dividends stream core coming grow confident than Business. Agency and significant our stable, while now recurring in income earnings portion to we’re our continue

in loans over record originations XX% $X.X Looking our the generated a quarter. we in results which is XXXX fourth from originated is the closing and in fourth for quarter increase strong loans in million our which $X.X another our Business, produced a of We approximately we of record $XX billion in at previous billion over third Agency Agency the originations a XXXX. XX% new platform, quarter our increase income volume

volume. Our a $X.X X.XX% fourth compared on quarter all including X.XX% sales sales over increase fees which to our miscellaneous was billion was third margin quarter on sales The fourth margin XX% quarter our volume also in our is in changes sale fourth quarter due products. and recorded of the in our sales in quarter expense to approximately quarter we mix size loan XX% And to third third XX% on commission compared gains gains. our as of a our

quarter therefore of changes in fees. loans $X.X an due in larger lower also by percentages million compared some the $XXX volumes servicing future. during loans decrease committed or fluctuate our million, recorded rates quarter, margins type committed origination the MSR primarily to of servicing around mortgage fourth mainly the $XX.X We quarter that average rights Sales of in related mix mortgage rates servicing loan generally size billion GSE X.XX% third and on income to of X% our fourth loan of may have loans representing rights increase these the and to

with $XX.X significant billion an will of to during life eight years. to also million quarter of in estimated weighted forward annually. growth at predictable approximately another average income in basis $XX remaining of going excess a Our the a servicing points continue generate XX X% grew and portfolio and servicing XX, fee of annuity portfolio XXXX December approximately This XX%

fees of in $X.X write-off million MSRs net of a on in $XX.X for large prepayment related XXXX. of recorded off $X.X quarter Additionally, service yield the maintenance in loans. corresponding fees the These full received to for we we the these early for third provisions. to the loans produce book run This end and million prepayment quarter that revenue fourth fees in continues prepayment to certain as our compared accounted servicing have fees million year

continue as a balances deposits I mean with increase. slightly increase additional earnings We rising balances hedge they to of also provide our nearly against generate XXX interest significant less power interest-earning rates than million X-month rates natural escrow These will as LIBOR.

is net additional earnings. deposits In additional fact approximately a million deferred quarter that tax realize which the by these under $X liability $X reduced a annually million Business interest a Agency XXXX corporate could one increase approximately the in rates, the our every rates fourth in $X.XX Act. related in tax earn we our impact in meaningful did tax going for to required our December earlier $X.XX of as we provision Jobs Tax XXXX. of can approximately the And on of of increase as or deferred in XX, our AFFO Cuts significant an and believe to share mentioned the revaluation X% share $X.XX overall We benefit forward

So as had also a our for tremendous outlook clearly in very our Agency and positive we XXXX. XXXX we’re Ivan mentioned Business on

income has This to greatly $X.XX our the billion heading talk strong deep through balance XXXX XXXX balance sheet approximately like into portfolio fourth or with the a We in the transitional from originations that the exceeded grew confident XXXX million. investments had earnings $X.X future. portfolio new fourth substantially about XX% I’d core results billion of of investment year, able remain We rate an to finishing our be that continue transitional run $XXX for a extremely our expectation quarter closed year million lending incredible and $X.X to Now increased network generating operation. sheet very record our we’ll our originating of quarter. the grow to our which in growth we in

our XX in average all-in to mainly X.XX% to issued in a reduction new average with primarily as interest by at billion of facilities associated partially portfolio XX facilities to And convertible in X.XX% third compared core eight to yield yields investment CLO well at increase quarter to of the to an to Agency the expenses incurred XX the quarter report XX, financing fourth quarter. $XX as X.X a the in a financing last to portion that We largely we has billion of the more nonrecurring which in due due around remarks September offset our quarter in higher in fourth our of also the And equity vehicle The quarter which were to core growth. in That total to Business basis to spread compared from litigation billion assets, fourth on new by from and approximately fees $X.XX XX full from completes in up the XX that X.XX% debt for $X.X $X.X interest recorded in debt the I’ll growth fourth for CLO billion our the was debt quarter increased closed loss assets $X X.XX% quarter to to due funds at was to for related as our cost quarter. transformational our preferred our this we due cost decreased debt yield the And in this an was overall offset rate. to million in trust as an to joint convertible with and the now part venture we increased quarter in nice a core December fourth fourth fourth increase to pleased debt to take September investments fourth billion the was $X.XX rates to offering an in ratio approximately the an X.XX% mainly mostly on our step compared a CLO from to quarter partially in LIBOR. was to net XX% rate our X.XX% third mainly it quarter increase increase as in one-time business. experienced that from was at approximately exceeding December approximately quarter our including unwind for in at up by core franchise. cost to net of fourth to our core the third offering approximately X.X:X for questions on late in average not around due completes lower mainly billion operator interest $X.X an X.XX% quarter origination our this spot closed X.XX% significant in morning. our lower so vehicle borrowing new LIBOR. Overall approximately turn in X.X all third balance January our our at approximately third fourth the had been by of is X.X% quarter these as who the due approximately to in the offering And with third residential our for yield again which quarter X.XX% in XX runoff third December. trust time. average our debt compared equity Glenda? The Our last preferred September on in the significant of fourth million The from to the million quarter LIBOR quarter mortgage third our GAAP repaid due September may the and spreads the December well decreased cost X.X:X accelerated the of our quarter balance from the from million average was early quarter the leverage debt X.XX% X.XX% at investments preferred debt perpetual equity prepared compare million for quarter The fourth X.XX% we in equity related fourth X the approximately yields our of combined quarter the to runoff fourth up LIBOR banking our largely offset lastly, we investments the overall preferred from XX, was which due you of quarter any as fourth a in back the basis spot as $X the quarter on of average which stock in December at the to debt quarter. cost originations ratios decreased as partially a lending and from at fees from debt was quarter which associated note non-cash well cost acquisition during quarter the when in in due XX are assets that XXXX to $X.X expensed for the including from our overall settlement a senior convertible carries stock have

Operator

JPMorgan. [Operator from Instructions] And line question the comes from Rick Shane our first of

Your now line is open.

Rick Shane

want you an little it larger were caused the of and because was understand transactions just two Really like a gain bit things, compression in that sale. impact margin to feels there quarter doing on on

on related thing is also the to about originations, are Business the rates You increased we lower talk pressures here? competitive that seeing Structured same

Ivan Kaufman

Paul I’ll competitive balance our and creating business and in address cost the the greater reducing sheet balance transitional homes sheet extremely been to larger I’ll but is of fact doing transactional effective in the extremely speak margins. we’ve let In loans. flexibility and

we’re manage is in effective our a strategy. a So extremely our margins, maintain to now our could where we’ll cheaper we bit and that of on because how be we borrowing our credit. We cycle we’re credit out our quality, to that side go feel but continues effectively able that concern of believe keep

And field, a relationships in anything effectiveness and in if standards we’re majority our become be we build us with way banking up bit then competitive our having because in our more loans as extremely synergies and the our maintaining allowed to the up bridge balance execution returns in tremendous well ends flexible the but of and our more sheet we CLO So as Agency has exponential. our use still fact tightening field volume. and credit have

allow believe maintain do to share So advantages on that the want the that real the continue to market. us in address Paul, you the side margins of strategic our I market our some Agency Business? business competitive in have to to although we

Paul Elenio

GSE mix the products. the has it’s mix and of do with the volume to Rick of So the

do carry think past quarter is we the higher it from more this we to we the little lighter quarter, that did to had I in that some quarter FHA the range very small really also have but that loans is than I they a sales guided - but anywhere people bit large in timing the a FHA has just quarter then we last margin a GSE what and of margin than business with mix. XXX did this to XXX came unpredictable other with a carry business. margin We in prior did

again So margin right is to and it to on the products, going forward range mix size XXX business. think from products on just has one us I GSE do of with for all-in the of anywhere XXX

just to with runoff the runoff comments been we for then borrowing paper I quarter yields Business off on in our Structured ran unlevered. originations they were able add than how and the did the about but it lower and the subordinated the that or we’ve compete had to in think lower some to quarter competitiveness Ivan’s have effectively this us, last

XX% higher the on and all which fourth have the competitive and growth levered the in the that’s but we a a our they on reduction. a levered originations generate basis strong return to financing cost think basis for side both return return still made with rates is even pressures on very levered in due improvements of we funds we’ve quarter the leverage did So

Rick Shane

higher question was we going Structured Business running which increase. leverage CLO leverage to And you comfortable segue on actually is and perfect more see that to your with my the that business did follow-up facet structure forward? the Ivan’s Are financing balance with sheet a that, in

Ivan Kaufman

with is comfortable senior to mean enhancement. take-out CLOs debt are leverage the execution right the the structural primarily take-out where XXX% generally we’re size debt an we’ve a very the in about an side the and our and and with higher talked on I Agency and as senior that CLO debt, on senior Agency Yes past,

with loans structures are with very, brief assets structures. and those into very originating the fit these and in very a comfortable are comfortable are we have the we way we we So

Paul Elenio

And just to add to that…

Rick Shane

Okay.

Paul Elenio

quarter up was securitizations, the during a the flexible. little reasons, and with The we with the comfortable are increase leverage are on few The little new mentioned, for of very non-recourse because Ivan as leverage did view and equity the that getting we the leverage convert is was us. was capital convert capital for Ivan’s in bit in think, mind, we a it really also up of in my growth bit I mind

a bit equity So the like in it does of distort little leverage, but really view grow. that to was capital

Rick Shane

Got it. very you much. guys Thank

Operator

our Rahmani of Thank KBW. you. And question the comes next line from Jade from

Your open. is now line

Jade Rahmani

Thanks very increase credit? with much. the you made Can you concern to on comments on elaborate just respect

Ivan Kaufman

in base one have in footprint I the if more liquidity compete out. don’t market, if or a the the of are price tend credit a people tech franchise think players, expertise newspapers credit another is other the of there are credit and and well always look to or reports. in is in the the ways customer side. coming who there and and always There on on and the is fund And don’t have especially brand the two market a is and credit are new lot or you lot funds you the debt to compete competing the

on are more on this price efforts in point have the side. competing our put the to we chosen cycle where at We

Agency a on when that debt of the it. only a leverage we market originate strategic on position make the which earnings we also able just the Agency side We also the not do debt able the loan, not into our capability are we make convert of in with returns, spread and so are we have Business, the been very in when the because Business to earnings in synergies is do our to to we reflected that

relationships sheet on us our banking balance as sizable, the is economies gives as in gives approaching CLO both the huge our and market well strategic history and $X with a advantage. side Our us brand very billion, our

That’s as more how we able feel to well. our are be how So probably we this year. share originate maintain will grow that’s and able market we year share to market last

Jade Rahmani

And the on seeing market is are or on driving Structured loosening in leverage? it the you compromises higher

Ivan Kaufman

I the sense players standpoint level you in more think a some deterioration. common always from there competitive is that market the the just pressures of more have

and try stay do we what So is from sponsors. away loose

of a will new see go new lot debt some of sponsors. the funds You after

on just the the margin, that’s we side them in course of normal and on the cycle. credit You’ll see bit little are go where a

Jade Rahmani

In terms you have interest being changes widened? borrowers of terms sentiment of any spreads because with seen is re-trade increasing pipelines, have rate pushed to fixed rate transaction closing in having out, expectations, deals or any

Ivan Kaufman

than capitalization of People and and out, wanted are in them that now how they transactions to they different definitely are scrambling in as that they scramble some more to transactions try these different, people closing anticipated. The to contract take figure the get December done. numbers are

proceeds. are on result transactions They it they They taking have definitely and capital. and on working to place getting will some them to acquisition going are make transactions is the their are some adjustment equity doing They -- So in re-trade what seeking in that a definitely are mathematical some more there now. can less through. of of it so greater try they’re purchase, work, these

Jade Rahmani

and terms the planned outlook you terms of Fed in So sort do business, rates in the XQ, be fees could digests high pick as as of for the year? of soft the up volumes, then think in what and GSE everyone potentially that later XQ as

Ivan Kaufman

year an overall bigger the is be think going market. than to GSE don’t business I as

the be market projecting at know don’t more. or was going rest looking or increase where we bit a markets little were the We same a the same is. are the little I they think I bit before that the to would of less. the say

have We pipeline. a significant

be which very of course, is rates that business has think slowed a lot the year. and little business market they year to The refinance, little last five-year, affect all market, last with rates. to which am little consistent go have consistent where of watch They a is for there their bit purchase is mix we pipeline interest XX-year broken loans going bit, change part would going definitely and for refinance, very business. is is, sure refinance But to I durations, that and question into, a product of going how year. but Our with pipeline but I little loan, bit, I be going how constantly shorter somewhat see are was refinance. think to interest our a up maybe is not But come lower with up the fall. to business, it’s overall XX-year it right now the would be seven-year duration the slowed a capitalization, instead equity is are active people the more a last year, how for XX going

Paul Elenio

I million a that Ivan little gave right, January. very We and is to Yeah. And did numbers it’s in originate consistent. some in of $XXX color I Jade think loans GSE

$XXX do expecting so $XXX We put February, in are million to about that million. another us will

and ability I we we are and grow of will do us the year $X hopefully think last on billion think to that we So what did life to on have I to over puts the year. pace the to pace billion $X.X that

sell in expected get you did loans Business. you for first commentary numbers we Agency analyst quarter our the saw the As as far quarter, some We fourth as I more guys, the in think, the the then the from math.

traditional. balance see then we the a have into quarter is little going what a of bit first less held-for-sale normally We

in pace on from than quarters. again even gain first maybe maybe are we we volume last dollars quarter a and in sale did other to But the perspective a lighter are they the what year -- do on more. So

Jade Rahmani

Thanks.

-- dividend again. raised question picture bigger Just a picture and actually you big the

some any converting to converting consider seen of C TRS there On with corporate you we’ve C management the to that amount Corp.’s the are contemplate lower tax rationale asset considering Is rate. Corp. to side companies a and income generating? the

Paul Elenio

we look the It’s TRS operating business. But look now we’ve get at in structure. sites. extensive and but the your growing, TRS received something that done dividend right we that’s Jade, do but large in always will REIT new it, the the the comfortable tax analysis we reduced The now something now point it’s the we and understand we very businesses people always rates it’s something of consider with code on not are on the business under at being right we our way is an benefit have are the now something and

Jade Rahmani

taking for the much very Thanks questions.

Operator

And Bank. you. of next George question Deutsche from line comes Thank Bahamondes the from our

Your line is now open.

George Bahamondes

Hi, guys. Good morning.

is a the $XX size. few question about loans on it’s noticed [inaudible] representative are million XQ of during quarter? about the in million or of million just terms on in year loan, So in business, across bridge $XX larger transitional $XXX that loan Where loans million I it driving average there $XXX XX

Paul Elenio

Yeah.

Ivan Kaufman

-- We We we are doing definitely I larger doing are definitely two significantly be larger think, did, loans. loans.

facilities, facility loans. has us larger work our growth the So capital given on size of allowed a and these on to

loan, that think, average question year. doubled I no even balance our might So have over last

So that’s to comments category. we are to any very, that beneficial in very work that? able and Paul, pleased be on

Paul Elenio

Yeah.

last I year. think our Ivan size almost doubled is loan from We right.

at units. on Definitely loan two size To we This our million. your less that have grown. looking year I it’s comment, loan am XXX% did were in average and that quarter year XX did $XXX has greater last than last quarter than $XX greater on the XX up did million have and that we units billion four $X.X year loans million. an $XX we that of size were the $XX think about than a I on to We million.

has average significantly in So we the size our grown $XX did loan for But, pretty balance, have year. an our loans the some overall, loan quarter. average larger million

George Bahamondes

Great.

the for Thanks Okay. color.

Operator

next JMP Securities. the Thank from you. And of from Steve Delaney comes line question our

line is open. now Your

Steve Delaney

and congratulations outstanding and morning for an Good on sure. quarter year, Thanks.

Ivan Kaufman

Thanks.

Paul Elenio

Thanks.

Steve Delaney

the you the the or now that dramatic and allowing like lending. of of is the the have that drive the What function of kind or may a is business. it technology you sides on it people or added we say progress Would you progress, when both more you have to at more a lending function this is products look the in growth of have Ivan, that platform?

Ivan Kaufman

been Steve, organically year. to and So, platform We answer growing a very our no originations each we there is that. diverse run one have franchise

four XX core So, or ago Today loan originators. I’d probably eight core probably years to we have say, you six had XX originators.

get have and to we loans. to the balance larger to touched years them area. ability in homegrown. almost to that our brand do sheet are large larger three these We have loans. building to didn’t in all train capital and invested earlier year now and doing of of we didn’t takes the of our XX we the We our technology the and seeing benefits are takes It people have All guys. five investments. It on those We guys, and made

stronger getting Our brand and stronger. is and just stronger

and was years were Our greater. Mac’s are space. product and Five greater diversity and we a in that Mac Freddie developed program and We Freddie balance small leader getting program. there with no is greater that we in ago

REIT not and four and paid just two business very them another about frequently, balance put loans three are this the building mortgage on sheet we in treadmill off the that where So get a you one on to you and on. talk put years, does year, years in we

between the Agency an and from from entire Agency that we synergies depth of Business. the portfolio business own and from business will brand stronger. our the Business business now Agency the spans source continue keep of generates investing build believe Business balance that our of and is new sheet are we’re generating our and servicing originations amount And run-off I a to that that generate have in that of the building we We business The or amount getting it and exponential residual bill. continued

very, So of multiple we’ve our heavily business. invested aspect very in

so. do to continued are We

Steve Delaney

just to for other you one the helpful. -- ground you, a lot covered noticed already, I That’s just won’t death. those But -- Paul. beat Ivan. final thing, I And Thank so items one of

declined like Just credit account to loans the performing Can that at looking legacy what end credit, at it being decrease? the with loans things when about at Paul, talk repaid to for September you non-performing from year two reclassified just looks XX. five or on the went

Paul Elenio

payoff great. that’s non-performing. loan Steve, We had that Yeah. was one

But came then temporally and was become fully non-performing long full. between end loan time performing to numbers We that force that reserved had repaid and we loan books on wrote non-performing for that’s year up spent was the GAAP against the that had that from out So another XXXX. just we purposes. and in non-performing driving we and we the clean for just asset off two another it the had a

Steve Delaney

on the the tax Okay. helpful for impact. I law us Great. for modeling. And thanks That’s for clarity appreciate the time.

Paul Elenio

Thanks.

Operator

from of Thank from our line next you. And Lee comes the Advisors. Omega Cooperman question

is line open. now Your

Lee Cooperman

Thank you.

your getting adequate you three you feel more you have do do view position four Just you or more you presently, have for or opportunities have questions capital demand capital. how or I out. guess do capital One, than

think, our I touch to I the was exposure affect Third, point Fed quarter this. X times Second, rates, you be you assume but I times the you unless to net if on would were felt dividend increase the What not the book? Ivan, raised rising this, that assume sustainable. have X undertaken

conversion? So force under can intend million, mature way XXXX, conditions back know kind which the into run shareholders you the the you them. sustainable And X% the can of what the around think business, returns you you but in to [ph] ROE, convertible question, value? $XXX administrative I just you to X% on generate converge what call is book (XX:XX) fourth

Paul Elenio

Okay.

So…

Ivan Kaufman

it will over of them a turn then and to Paul. couple I address

Lee Cooperman

much good Thank and you. you Thank Yeah. congratulations on a year. very

Ivan Kaufman

easy us, take Paul. and to ones, respect it’s are know the very the as when With Thanks. course, LIBOR actually to rises, will beneficial interest we of you Well, tough rates, I to rising and lender beneficial. leave LIBOR-based

that. So we’re okay with

that. are with We good

in or LIBOR We extent in I we If dollar about which is our another income, also a or dollar LIBOR increase $X.XX for and million rises million balances $XXX about probably the that’s believe on $X escrow grows earnings. more basis at earnings. have one to $X.XX point

with key, an credit, interest our right and LIBOR pretty right is delinquency even is the and than was have performance of we capitalization of depth sure and our course, caps on bars So rise rates some in in relative there the rising we eye rates right sure our our and keeping for if now what a well-positioned better is level making have underwritten. making are The right books we portfolio to earnings.

proper we in moment year to instruments Paul, our trading it’s CLOs, and raise our book that think are would the in book in us shape. do good So accretive if you pretty looking we be whether we capital all amount at shape. to will always at But the stock ways and we effective at really is prices raised of to where last capital, look the time it appropriate We if that. capital continue always of great our order in forms. part the grow want are the to and right good to a appropriate debt rest? take at and From in level

Paul Elenio

Sure.

it a asset the points, is escrow accretion to and income so book because billion, much XX our what interest the rising I Lee on $X rates, So commentary side. is floating, the in the thing both on, net ran on if Structured we LIBOR right is the side, on up Structured earnings is, but floating but Ivan’s of see well, on of XX% one increase as think, only basis will $X.X it’s -- add, from debt book balances so I about not XX% our a on

but be and and your end sustainable we be pretty as dividend in We Agency we that. we’ll so be the pay the on to lower it rate, the comments is We our able in a the very to receive to is continue benefit we to our over steady, will be over actually sustainable. significant slow at far to think there we we grow going tax that We Business we the growth obviously, commentary in about think to year also of are we from think talked very As the had Structured dividend will we think book. do able future. grow dividend, the think time able what continue rates, grow time are will our a is

XX% a they As said, the than always like business, between about We to are Business, And Business our talked Agency as or and in we year. XX% business Obviously, think the has came will in we we have far to so with but other. each Business, the compensation. we off feed lot, year interrelated even our do had that they Structured ROEs Structured have this in this we XX% a our we the and cohesive higher we ROE. with we on portfolio, run would continue and in growth Lee, in incremental cost, our this grow scale think are do increase they very Structured and the

is So a drive scale in combined borrowing reduced think think the do could higher and even there the ROE leverage we going do course forward. business. that of additional We

may little and XX% get that XX%, So here that there time are higher. right can be we even to we

control. don’t the comfortable the and think last we early, right I we to a hopefully point can’t operating covert. prior early. in may that’s very have higher that’s in to XX% months convert your force XX% in a but the was on our the I couple it the are believe To We to of we future. force not even maturity, something So converter

Lee Cooperman

Good. and Thank congratulation luck good very you very much responses and for XXXX. a good on

Paul Elenio

Lee. you, Thank

Ivan Kaufman

Lee. you, Thank

Operator

Jade of we Rahmani KBW. follow-up the a question have And you. Thank from line from

open. now line Your is

Ryan Tomasello

for Ryan Good morning. for It’s follow-up. actually Jade. the Thanks Tomasello taking

over Just past spread on dovetailing amount are compression seen balance you maybe sheet loans off the on and quarters, quarter? give the perhaps, quarter incremental spreads have the originating the are today, few the be of quantify may you question, side in where and earlier you the current can last

Ivan Kaufman

part that cut get of off? first repeat Can the again question you I

Ryan Tomasello

have how perhaps past the on much balance the sheet side loans basis spread compression on you the few bps incremental seen quantify can Just over if on you quarters?

Ivan Kaufman

I the Yeah. the structure basis lending XX say class happened of basis has I period time. points depending the on that’s on that capital asset been to say between in that spread where compression of you are would XX anywhere a side. it over would points anywhere

up million $XXX -- we and would probably $XXX tightest on probably the So $XXX over, bridge was we side, million tightened below million from never the to while. a got was maybe effectively lending say so was what $XXX for went that ever a was million I ranged

will to we million $XXX So probably million. $XXX

quality larger So months period range that’s of and XX that’s now. months we of tightening took time place loans, where right are the is. to there higher The the pressure XX probably over of the the loans, probably that more

less As on side can compression I XX as you spread -- points basis that But range loans probably tightened we we much. hasn’t the seen. and we’ve is that would do to trust say a smaller lot that points basis get know, that and XX of

Ryan Tomasello

breakouts after And you overhead the it that at back just the running in the ROEs that incorporating business, strong ROEs corporate ROEs, you going saw look for you the segment if seems are to despite helpful like low teens the have pre-expense balance digits, sheet mid-single provide. in

on So if non-performing Business maybe effectively, which You base what can you that? up in amount the and any tied are factors would thoughts mentioned outline assets? growing Structured maybe that some G&A and is remaining further these depressing being rationalize the underperforming

Paul Elenio

Sure. Ryan, so it’s Paul.

the is we it’s interrelated very presented for GAAP. expenses that. we easy that them there segment, of I it a do were it’s under a But requirement. think the to so the view way, I at ROE not each feeding GAAP again, cohesive, very don’t the it’s and But, GAAP, couple you it we factors way information a driving if have drive the allocate completely But between do view to easy of look will did that on best not are we our both people and segment is helpful really But meaningful. that businesses, think appropriate other, so off good question. each businesses

that $X do that the costs ROE commentary we that important over our drive we leverage business will very are as put significantly. and done of as $XXX mentioned question, we not interest of importantly will back is generate million us billion portfolio were the maybe get mentioned, ROE. about have we much million other in And assets, continue working ‘XX And of to we I return. As is and process to and to one that able additional and $XX to liquidating have we reduce be Tahoe the you that will if in the we grow monetizing legacy are them more incremental half on cost a get you tied of that’s and so, may add The two second significant not hopeful have and the side and in the flow interest the earning asset be in to any Structured by scalability answers my currently, into the on up to Lake Lee grow well.

that in ROE. normal significant over the us it into million as of certainly deployed drive it back take amount get So will help flow time a we $XXX some time than our increase will

Ivan Kaufman

put a know, our wage portion very employment maintain less a that spent I ‘XX to the and Okay. little think softness very look ‘XX, -- I environment. and to difficult as costs, manage been is in employment to ratio manage do volume which better I will competitive think have position forward it us And XXXX think such do our our manage in there employment and on in as the we a basis, to our if be of is large market able will you effectively. there has costs I more

Ryan Tomasello

taking the follow-up. Great. Thanks for

Operator

And you. over back concludes remarks. would for for session like that to turn Thank management I closing to call question-and-answer today. our the

Ivan Kaufman

great for Arbor to certainly you support another I questions thank Well, Trust. look forward really your you and a Have good your our and everybody. XXXX year at Realty time day and for thank

Operator

great participation today’s conference. Everyone your have thank the in a you day. gentlemen, now for you and This program concludes Ladies may and disconnect.

Arbor Realty Trust (ABR) 23 Feb 182017 Q4 Earnings call transcript